Second class IPO?
Royal Mail undersold
The National Audit Office has criticised the government's privatisation of Royal Mail saying that business secretary Vince Cable ignored advice that the 330p a share offer undervalued the business and estimating that the sale price cost the taxpayer a potential £750m had the offer been priced at 455p instead. The National Audit Office report also criticised the decision to allow 16 City institutions 'priority' in buying shares when public demand could have taken up the entire offering. Six of the 16 are said to have sold out of their positions within weeks of the offering at substantial profits.
Questionable conduct
Osborne anger
Chancellor George Osborne has expressed his disquiet over the way the Financial Conduct Authority (FCA) has handled the announcement of an inquiry into the conduct of the insurance industry, which hammered the valuation of a number of insurance company shares late last week. FCA head Martin Wheatley admitted this week that the leaked announcement was "not its finest hour", after the chancellor said that the incident was "damaging both to the FCA as an institution and to UK's reputation for regulatory stability and competence". The probe itself is expected to focus the potential mistreatment of customers who hold so-called 'zombie funds', life assurance policies sold over a 30-year period from 1970 to 2000, which are now closed.
BHP split?
Sector action
Mining giant BHP Billiton this week admitted that it is considering further rationalisation of its operations in response to press reports that the company was preparing to hive off non-core commodity operations in aluminium, nickel and manganese to concentrate on core products such as iron ore, copper, coal and oil and gas. This could potentially mark a period of significant change in the diversified resources sector given that significant funds are being raised with a view to investment. The most notable development on this front could be the initial $2.5bn raised by former Xstrata boss Mick Davis for his X2 Resources vehicle with which to acquire mining assets.
Spending spree
£200bn coming
Many of the UK's bigger companies are planning to loosen the purse strings in the coming years as they look to take advantage of the improving economic conditions. A survey by accountants Deloitte suggested that 80 per cent of companies with a turnover of more than £1bn are planning to invest this year. The survey estimated the potential aggregate value of that investment over the next two years could top £200bn. But there was less encouraging news from the latest UK manufacturing Purchasing Managers Index survey, which showed a slowdown in activity in March compared with consensus forecasts of a further expansion.
Eurowoe
Deflation fears
Inflation in the eurozone economic bloc has dipped further, dropping to 0.5 per cent in the most recent reading, prompting further calls for more dramatic action from the European Central Bank in the form of quantitative easing. Meanwhile, factory output growth in the eurozone continued to expand in March, albeit at a slightly slower rate than in February as German output edged downwards, but this was partly mitigated by an unexpected return to growth with its biggest uplift in almost three years.
China crisis
Output concern
Output data from China's factories failed to show the expected post-Chinese New Year uplift in the latest official figures to be released. This, coupled with growing worries about the health of China's banking sector, has prompted further doubts about the strength of the Chinese economy. Chinese manufacturing sector activity, as measured by official Purchasing Managers Index figures, rose from 50.2 to just 50.3 in March, indicating that it is only expanding very marginally, while a HSBC/Markit survey, which measures activity at the smaller end of the sector, indicated that output continues to contract. The figures raised concerns that China may undershoot official target growth of 7.5 per cent for the opening quarter.
